A career politician’s dream come true.
Here’s a political issue where you’re guaranteed votes from not only old, poor people, but from anybody with a heart, and without a brain…of which there are many.
Furthermore, the true costs are deferred so far into the future that you can rely on the ignorance of young people to not look at the pension’s underlying finances.
But the biggest benefit, the pure genius of this political tool, is that by the time the sh!t hits the fan, and these behemoths have to actually be funded, you’ll be either long retired from politics or dead.
It is literally the perfect crime.
Thus, I found the following data quite interesting.
The OECD seems to have calculated a ratio that takes the present value of a country’s public pension (ie-what that country can expect to pay out in today’s value in pensions) and divided it by total earnings in the economy (net and gross).
In other words what has the government promise to pay the people as a multiple of how much the people are making.
This is key as it is the earnings, what the people are making, that will inevitably have to pay for the pensions.
The more the government promises to pay out relative to earnings, the higher the tax rate.
Of course this tax rate will not befall current day pensioners, but will be deferred to future workers as pensions are paid out over the course of retirement.
And while I’m a big fan of Luxembourg and their phenomenal economic success, my heart is still learning towards good ol’ Ireland.
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